Morning Report – Wednesday 10th June

Main Headlines

The FOMC is not expected to make any adjustment to policy today. The surprise gain in May’s payroll report is not likely to change the tone and the committee “will remain considerably dovish” about their outlook. Officials will also publish their employment and growth targets for the first time since the outbreak amid increasing focus on the racial disparities in joblessness.

U.S. and European stock futures rallied, with Asian equities erasing losses, as risk assets picked up momentum ahead of the conclusion of the Fed meeting. After a record-breaking rally that added over $21 trillion to global stock markets, technical indicators suggest a pullback may be overdue. Treasuries and gold were steady. Oil fell on a report U.S. crude stockpiles expanded.

Germany is still awaiting official word from Washington over Donald Trump’s threats to repatriate U.S. troops. In the meantime, Angela Merkel’s already tense ties with Vladimir Putin have taken a turn for the worse. It puts her under pressure to take a tougher stand on the Kremlin as Germany probes a series of incidents including a 2015 cyberattack on the Bundestag and a murder in Berlin last summer.

GBP

The pound was driven by dollar moves overnight as shifts in global risk appetite play a bigger role for sterling than domestic issues such as Brexit. The pound has risen 3.5% against the dollar this month touching its highest levels since March. U.K. Chancellor Sunak Urged to Treat Coronavirus Borrowing as War Debt.

EUR

European Central Bank officials are drawing up a scheme to cope with potentially hundreds of billions of euros of unpaid loans in the wake of the coronavirus outbreak. The amount of debt in the euro zone that is considered unlikely to ever be fully repaid already stands at more than half a trillion euros, including credit cards, car loans and mortgages, according to official statistics. The EU’s chief Brexit negotiator, Michel Barnier, is scheduled to speak later on Wednesday, which may yield details that will help determine whether market sentiment will improve in respect to Brexit.

USD

The dollar has continued to fall against most currencies on this morning amid some speculation the U.S. Federal Reserve could take steps to curb a recent rise in bond yields in a policy decision later today.

Main Economic Data/Central Banks/Government (All Times BST)

7:45 a.m.: France April industrial production
8:00 a.m.: Turkey March unemployment rate
8:00 a.m.: ECB’s Muller speaks
8:30 a.m.: ECB’s Kazimir speaks
11:00 a.m.: Riksbank’s Ingves speaks
12:00 p.m.: ECB’s Schnabel speaks
1:30 p.m.: U.S. May CPI
2:30 p.m.: ECB’s Guindos speaks
7:00 p.m.: FOMC rate decision